How Home Loans Have Changed since 2000

yes, but you make the assumption that you don't have to sell the house due to factors such as sudden job loss, unplanned events such as accident/injury causing disability etc. The point of 20% down is that you have enough equity even for a turbulent market and if you do need to sell quickly due to possible factors above, you still should be ok. Otherwise, you are assuming that nothing bad will happen and you can continue paying the mortgage.

Cars and houses are not the same thing. Cars depreciate in value from the moment you drive them out of the parking lot of the dealer. House values generally stay the same or go up.

Continuing to make payments on a house when you're underwater on the basis that you can still live in it is a really bad idea. Even if you can afford the payments, why would you want to overpay for something? That's why so many people walked away from their houses during the real estate crash: when you have no guarantees that the asset you're paying for will appreciate in value back to the original value, it's a much more financially sound decision to ignore the sunk cost and cut your losses ASAP.

> The unpleasantness in 2008 onward was a conscious decision by the Obama administration to not bail out underwater home owners.

You might be able to make an argument that the unpleasantness in 2009 onward (or, more specifically, late January of 2009 onward) was the fault of some conscious decision of the Obama administration, but as popular as it has been with the Trump campaign recently, pretending that the Obama administration is responsible for things which occurred before his inauguration is indefensible without some kind of strong evidence for the extraordinary claim of retrocausality.

(Also, factually, the administration decided to bail homeowners out in a variety of ways, though perhaps not as direct, universal, and significant of a bailout as some advocates -- myself included -- would have preferred.)

>The unpleasantness in 2008 onward was a conscious decision by the Obama administration

Bush was president for 100% of the year 2008.

I consider tax free discharge of defaulted mortgage loans to be a bailout of ordinary homeowners.

Yes, you personally are much better off with no money down (0% equity) and a long-term, fixed rate, tax deductible, low interest and non-recourse mortgage loan. You control the asset (the condo) but have very little downside risk. If prices fall 20%, even if you kept your job, even if you won millions in the lottery, it might be in your self-interest to walk away and let the bank foreclose. I don't think there's a moral dimension to that decision; it's a matter of contract law. But I am pointing out that this is a tragedy of the commons in that millions of people acting this way creates an environment in which downside risk is hugely amplified in the event of significant price declines in the housing market, which is what we saw in 2008 - the system beginning to feed on itself in a vicious downward spiral. When I read things such as your initial comment a little voice in my head says ''here we go again''.

Just remember - state matters heavily in that decision! If I had lived in a non-recourse state, I would have gladly performed a strategic default a couple of years ago and left the bank to pay the loss in value of my place.

Because the mortgages are backed by the US government.

If renting is cheaper than buying right now, a better question is whether rent will increase faster over the next five years than an index fund portfolio funded with the difference.

There are calculators for this, NY Times and Washington Post have them. Your anecdotes can be played around with variables on their data visualizations.

The break even point is typically 11 years in NYC and SF. Find and play around with the calculators yourself.

There are a number of reasons beside owning the property outright. They can make a bigger down payment than you can, so the total debt is lower. They bought it at a much lower price many years ago. Their total capitalization is much larger than yours, which drives interest rates toward zero. Their tax basis is different than your tax basis would be.

It is straightforward financial math. If they have more capital than you or a different tax basis, they can have a lower monthly cost basis than you.

At least where I live, many landlords have no mortgage at all, because they just buy properties with cash. Another scenario would be a landlord making a very large down payment, and thus, financing a much smaller amount, and thus a much lower monthly payment.

Also, the landlord could have bought the property before the price went up. Their mortgage does not necessarily reflect today's price.

Maybe they bought it 20 years ago - in CA that would be lower price and lower property tax.

Rents are set by the market not the interest rate.

Typically HOA fees don't exist in rentals where as in condos that's an extra fee you're paying every month in addition to your mortgage. The $400k condo is going to have a substantial HOA fee.

I only have knowledge of my local area, but for condos around the $200k price range here have HOA fees around $500/mo. That would put him right back at a wash for monthly price if they didn't put any down payment on the condo.

You are making many improper assumptions. My case is not "median", the distribution of rents and prices are often not the same, and the relationship between rent and price can vary significantly between locations within Seattle at any particular point on those distributions.

The breakeven mortgage based on my rent by my best calculation would be around $700k, depending on a number of factors. For better or worse, places like I rent sell for much more than that. Having been looking at condos all over Seattle, the relationship between price and rent vary significantly by location.

> ... most of them still need to buy elsewhere after they sell a house.

This is one reason that I never understood people treating their first house as an investment. Yay, it went up 50%... And so did the house you'll buy after you sell it. You need to live somewhere. Your first house is covering a short position, not an investment.

Yes, "PMI".

I think I have to agree with my child co-commenters, that if they're waiving PMI in one sense, you're paying for it in another.

You always have to add up all the pieces -- over their respective lifespans -- and see where your total costs come out. As well, whether retaining more money up front and pumped into your own investments is going to outperform any additional eventual expense, allowing you net (and also considering taxes) to come out ahead.

Past a certain point, I'd say, make sure you're doing pretty well, financially, even if you end up leaving a couple of hundred or even a thousand on the table over the lifespan of the load. Instead, focus your remaining time and energy on having a good life. Worth far more than worrying about the last dollar.

You don't get something for nothing here. The low down payment loans that lack PMI generally have higher rates. Lender-paid PMI always comes with a higher rate. Even if your credit is well above 720 it can still be better to pay PMI than to have a higher-rate loan. The PMI eventually goes away; to get rid of a higher rate, you have to refinance.

The best choice depends on factors such as how long you will keep the home, but if you're putting less than 20 percent down, avoiding PMI is not a worthwhile objective. PMI might actually be the best deal.

In addition, PMI was not originally tax deductible. They made it tax as one of those stimulus measures, I think around 2008 or 2009 (about 1 month after I paid mine off... not that I'm bitter or anything).

Since PMI is tax deductible now that makes it effectively less expensive, and avoiding it less advantageous/important.